As risks rise, boards respond

A global view of risk committees

Boards of directors have been working hard to fulfill their risk oversight responsibilities in a challenging environment. Regulations are changing rapidly in most industries, and vary significantly across countries. Investors, analysts, and the public are demanding greater transparency into risk and risk management, as are creditors, counterparties, and other stakeholders. Many boards legitimately wonder not only what regulators want, but also which approaches to risk oversight actually work.

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Deloitte set out to study a specific and very effective risk governance mechanism: board-level risk committees. This report reveals the prevalence of board-level risk committees (whether standalone committees focused solely on risk, or hybrid committees such as audit/risk) based on analysis of 400 large public companies in eight countries.

Here’s what we found:

Board-level risk committees are well-established and widespread — present in 38% of the 400 companies analyzed. About a quarter (22%) have standalone board-level risk committees, while 16% oversee risk through hybrid board-level committees.

As might be expected, board-level risk committees are most prevalent in FSI companies (86%), but are also present in other industries (27%), often to a significant extent, depending on the country.

Local regulations affect risk oversight structures. Australia, Brazil, Mexico, Singapore, the UK, and the US have regulations that require risk committees at the board level for FSI companies (sometimes dependent on the type and size of the company).

Overall, 62% of all companies analyzed do not have a board-level risk committee. This largely reflects the lack of regulatory requirements for board-level risk committees in non-FSI companies in most countries.

The bottom line, is that every board should periodically assess the risk oversight and governance needs of the organization and take whatever steps it deems necessary to address those needs. A board-level risk committee, whether standalone or hybrid, is one effective means of attaining the necessary visibility into risks and risk management and of exercising risk oversight. It is also one that most boards should at least consider. Get the full story, download the report now.

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